Personal Finance
Record breaking summer heat waves prompt higher home cooling costs
Visitors walk during a long-duration heat wave impacting much of California on July 9 in Death Valley National Park, California.
Mario Tama | Getty Images News | Getty Images
Amid surging summer heat, the earth reached a new hottest day on record on July 22.
That day, the global average temperature was almost 63 degrees Fahrenheit, and was surrounded by similar high temperature days.
Across the U.S. this summer, many areas have experienced unrelenting heat waves.
As a result, many Americans face a tough tradeoff between paying higher cooling costs or suffering in the heat to save money, research finds.
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This year, extreme heat is projected to lead home cooling to cost an average of $719 from June through September — up nearly 8% from $661 for the same period in 2023 — the National Energy Assistance Directors Association and the Center for Energy, Poverty and Climate estimate.
Home cooling costs have risen in the past decade as higher temperatures require more electricity.
And those higher temperatures are expected to get worse, with the U.S. by the end of the century projected to have at least 50 days per year with maximum temperatures above 95 degrees, according to new research from the JPMorgan Chase Institute.
“We’re seeing more and more high heat days and the impact of climate change,” said Heather Higginbottom, head of research, policy and insights for corporate responsibility at JPMorgan Chase. “That’s another expense that families and households have to manage.”
Some must ‘just go without cooling their homes’
Low-income households may be poised to suffer most amid rising temperatures.
During hot days, low-income households tend to go without cooling to save money. They spend 37% to 45% less on air conditioning than high-income households, JPMorgan Chase Institute found, based on an analysis of anonymized firm data.
A man walks near the Las Vegas strip during a heatwave in Las Vegas on July 7.
Robyn Beck | Afp | Getty Images
For most households, the higher electricity bills have limited effects on other spending. In Houston, an extra 95-degree day contributes to less than $1 in foregone spending for the average family, according to the JPMorgan Chase Institute’s research.
In two other cities the research evaluated — Los Angeles and Chicago — there was no statistically detectable effect.
“Lower-income households will spend less on air conditioning than middle- or higher-income households on high heat days, and essentially just go without cooling their homes as effectively for financial reasons,” Higginbottom said.
Rising energy prices have a greater impact on lower-income families because those increases take up a larger share of their budgets, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association.
For a high-income family, higher energy bills may push those costs from 3% to 3.1% of their budgets, a difference that likely won’t substantially impact their lives, Wolfe said.
But for low-income families, the share of those costs in their budgets may go from 8.3% to 11%, and substantially limit their discretionary income, he said.
Those low-income families tend to disproportionately include young children, elderly or disabled individuals, which means higher heat also poses a significant health risk, Wolfe said.
‘There’s no inexpensive solution’
While policies can help those vulnerable populations, it is a race against time, as temperatures rise faster than expected, he said.
“We’re having extended periods of very high temperatures, and we’re not prepared for it,” Wolfe said.
Two policy approaches can help, according to Wolfe — immediate help for people pay their cooling bills and long-term efforts to retrofit housing for low-income families so they can access affordable and modern cooling systems.
In the meantime, many families may be at risk of shut offs if they can’t pay their bills.
Turning up the temperature on the thermostat — say from 72 degrees to 78 degrees — can help reduce cooling costs. Installing more insulation can also result in savings, according to experts.
But this summer is a “wake up call” that bigger changes need to happen, Wolfe said.
“This is going to be expensive to adapt,” Wolfe said. “There’s no inexpensive solution.”
Franckreporter | E+ | Getty Images
Millions of older workers lost their jobs during the Covid-19 recession.
Between March and April 2020, 5.7 million workers ages 55 and up lost their jobs, according to the Economic Policy Institute’s analysis of federal data.
Now, five years since the onset of the pandemic, some older workers may be benefitting from policies that help them extend their careers.
“We’re seeing more and more employers putting in benefits and programs that help retain some of that older workforce,” said Carly Roszkowski, vice president of financial resilience programming at AARP.
These programs include phased retirement plans, part-time schedules and remote or hybrid work options, Roszkowski said.
Money is still the main reason why people want to stay in the workforce longer, particularly as inflation has pushed prices higher, according to Roszkowski. But there are also other motivators, including social connections, a sense of purpose or meaningful work that may help inspire individuals to continue to work.
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Working remotely may help extend careers
One lasting impact of the pandemic — increased flexibility to work remotely — may be helping some older workers delay retirement, according to new research from the Center for Retirement Research at Boston College.
The research finds that an individual who is working remotely is 1.4 percentage points less likely to retire than a worker in an otherwise comparable situation.
Based on those results, that could enable workers to extend their careers by almost a full year.
“If they delay claiming Social Security for that year, or delay digging into their 401(k) for that year, or contribute to their 401(k) for that year, that’s all going to be good for their finances,” said Geoffrey Sanzenbacher, a research fellow at the Center for Retirement Research and professor of the practice of economics at Boston College.
Whether or not individuals can work remotely comes down to employer preference. For example, some companies — JPMorgan, AT&T, Amazon and Dell — have moved to five-day in-office policies. The federal government, which has a workforce that skews older, has also moved to enforce in-person work policies under President Donald Trump.
Research suggests older workers benefit from remote work. In particular, the employment rate of older workers who have a disability increased by 10% following the pandemic, according to the Center for Retirement Research.
To be sure, not all careers may allow for remote work.
What career experts say to do now
Career experts say there are certain ways older workers can help extend the longevity of their working years.
Older workers should focus on upscaling — gaining new skills or boosting their current skill set — to help show off their skills to employers, said Vicki Salemi, career expert at Monster. That may be through a certification, online class or volunteering, she said.
Having a foundational, basic understanding of technology tools used in the workplace is also essential, said Kyle M.K., a talent strategy advisor at Indeed.com.
Older workers may also want to show off their relationship building skills, which can set them apart from younger generations that are more digitally inclined, according to Salemi.
Mentoring, conflict resolution or other interpersonal skills are highly sought after skills that should be highlighted, where possible, M.K. said.
By keeping digital profiles up to date on job search sites, older workers can emphasize their skills and experience, he said.
“Digital presence is sometimes the very first introduction that the employer will have with you,” M.K. said.
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If you’re eager to increase your retirement savings, a lesser-known 401(k) feature could significantly boost your nest egg, financial advisors say.
For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 in “catch-up contributions” if you’re age 50 and older. That catch-up contribution jumps to $11,250 for investors age 60 to 63.
Some plans offer after-tax 401(k) contributions on top of those caps. For 2025, the max 401(k) limit is $70,000, which includes employee deferrals, after-tax contributions, company matches, profit sharing and other deposits.
If you can afford to do this, “it’s an amazing outcome,” said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts.
“Sometimes, people don’t believe it’s real,” he said, because you can automatically contribute and then convert the funds to “turn it into tax-free income.”
However, many plans still don’t offer the feature. In 2023, only 22% of employer plans offered after-tax 401(k) contributions, according to the latest data from Vanguard’s How America Saves report. It’s most common in larger plans.
Even when it’s available, employee participation remains low. Only 9% of investors with access leveraged the feature in 2023, the same Vanguard report found. That’s down slightly from 10% in 2022.
How to start tax-free growth
After-tax and Roth contributions both begin with after-tax 401(k) deposits. But there’s a key difference: The taxes on future growth.
Roth money grows tax-free, which means future withdrawals aren’t subject to taxes. To compare, after-tax deposits grow tax-deferred, meaning your returns incur regular income taxes when withdrawn.
That’s why it’s important to convert after-tax funds to Roth periodically, experts say.
“The longer you leave those after-tax dollars in there, the more tax liability there will be,” Galli said. But the conversion process is “unique to each plan.”
Often, you’ll need to request the transfer, which could be limited to monthly or quarterly transactions, whereas the best plans convert to Roth automatically, he said.
Focus on regular 401(k) deferrals first
Before making after-tax 401(k) contributions, you should focus on maxing out regular pre-tax or Roth 401(k) deferrals to capture your employer match, said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina.
After that, cash flow permitting, you could “start filling up the after-tax bucket,” depending on your goals, he said. “In my opinion, every dollar needs to find a home.”
In 2023, only 14% of employees maxed out their 401(k) plan, according to the Vanguard report. For plans offering catch-up contributions, only 15% of employees participated.
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